We must act now on flood premiums

By Steve Estes

With the possibility of rapidly rising windstorm insurance premiums still on the horizon, although tempered by the efforts of our own Fair Insurance Rates for Monroe, new threats of rapidly rising flood insurance appear on the horizon.

Last year the US Congress passed legislation that could conceivably drive flood insurance premiums upward by more than 200 percent for local homeowners.

Congress declared that the National Flood Insurance Program was trending toward insolvency due to all the natural disasters involving flood waters in the last decade. So, Congress decided that folks in coastal communities should pay more for their flood insurance.

Flood insurance is subsidized by the federal government, which forces anyone in a flood zone to carry the insurance if their mortgage is backed by any federal agency. More than 80 percent of the home loans in existence today by most reports, are backed in some fashion by a federal agency.

In Monroe County, 32,000 properties carry flood insurance subsidized by the NFIP.

But of course, as it is prone to do, Congress ignored its own caveats in allowing implementation of the premium increases beginning this year.

Included in the legislation was the need for the Federal Emergency Management Agency, which oversees the NFIP program, to conduct an affordability study of the proposed new rate structure before implementation to make sure that the new rates wouldn’t drive homeowners from their homes, and that the new rates wouldn’t completely handcuff the budding real estate market recovery.

The study was never done. But in some cases, the new rates have been used for new policies, and in many cases have done exactly what the affordability study was supposed to determine…halted the sale of an existing home.

And in those cases, the premiums quoted have been well above the 200 percent estimate from Congress when the legislation was passed. In some cases, the premium increase would have been 700 percent.

The general outline of the rate increase program is that non-primary homes and commercial properties, with the same owners, will see 25 percent increases each year until FEMA determines that the rate being charged is actuarially sound.

Two problems with that scenario.

The first problem is that FEMA hasn’t yet determined what an actuarially sound rate will be. The second problem is that no actuarial study has been done to determine what rates need to be charged in what areas.

Monroe County is a donor county for windstorm insurance. Each year more than 25,000 policy holders pay more in premiums than Citizens Insurance, our only place to buy windstorm, has ever paid out for any storm. The profits from us go to subsidize other, larger counties in Florida, where lackluster building codes lead to much more severe damage from small storms.

This is also true with flood insurance. Based on recent information, Monroe County rate payers contribute more than $9 million per year in profits to the NFIP, money used to pay for flood claims in other areas where homes are not elevated, not regulated below base flood, not built to withstand the pressures of water in a storm.

Most Monroe County flood policy holders would welcome an actuarially sound rate for our area. We’d see a discount from what we already pay.

That’s not going to happen.

With constituencies alarmed by the horrendous potential spikes in required insurance premiums, some members of Congress have asked that the rate roll out be delayed until Congress receives the report on affordability it required in the legislation.

That move seems to have some support from coastal community representatives, but those inland are looking only at the fact that their voting blocs aren’t affected.

But they still come to the table with hands out when mudslides devastate their region, or when tornadoes rip up their towns, or avalanches sweep away mountainside communities. And they want the money from the same pocket, FEMA, where we deposit our insurance premium profits.

If there has been no other reason to ever establish a national catastrophic insurance fund, this is one all by itself.

FEMA must, by its legislative mandate, be ready with money during every national disaster, be it flood-related or fire-related or snow-related or earthquake-related or tornado-related.

Monroe County residents will be hard pressed to make ends meet with 700 percent increases in flood insurance premiums over the next five years. We may be looking at another mass exodus, similar to the one we saw when windstorm jumped more than 200 percent in one year.

We hope FIRM can find a way to help us in this battle. We need it.

But at the very least, all of our elected governing bodies should be pointing their lobbying efforts at some reasonable solution.